I recently found a 2014 article by Mark Andreessen on Bitcoin (BTC). In many ways, this is a vision (no wonder). I’ve been in this business for four years now, with a focus on the social impact of blockchain. It’s surprising to me that in 2014, before there was any institutional presence in Bitcoin – or, in fact, a common understanding of this new technology – Andreessen was able to quantify the potential economic and social impact in the future.

Almost eight years after he signed his words, I would like to touch on one of the topics of his article: micropayments. I want to explore how blockchain can help transform micropayments and thus generate revenue not only from certain aspects of the business that need to be addressed, but also help the most vulnerable in society.

Micropayments are not a new concept. Since the mid-1990s, micropayments have had varying popularity. By definition, micropayments are transactions with a value below a certain threshold. More importantly, below this limit, the transaction fee becomes a significant part of the total transaction value and therefore does not become financial. Another important aspect is that due to the small amount of cash, micropayments only relate to digital transactions with intangible goods. Any additional handling and shipping costs could add up to 100 times the value of the original transaction, making it completely irrelevant.

Credit card companies offer merchants different types of service plans in terms of the fees they charge. These plans usually include a lump sum that is charged for each transaction and a percentage that is charged for it. Unsurprisingly, this information is not publicly available from the card companies themselves, but is published by others who compare these prices as a service to merchants. In this context, let’s consider the commission that a merchant charges for a micropayment.

We assume the following:

● The lowest fee we found was 1.29% of the transaction amount, no one-time fee was charged.

● Since the smallest building block (most) of banknotes is 1 / 100th of the whole, that is, $ 0.01, this will be the minimum fee charged by the credit card company, regardless of whether it exceeds 1.29%.

By plotting the percentage of transaction fees as a function of the transaction value, we get the graph below. For example, a $ 0.01 transaction is charged a 100% fee, and a $ 0.10 transaction “only” 10%. Naturally, this demonstrates the irrationality of performing micropayment transactions on these payment platforms.

Blockchain has a solution
However, there is now an alternative. Blockchain technology provides an ideal solution for micropayments for many reasons. It offers a digital payment infrastructure that is getting faster every day, and most importantly, the minimum unit of payment for Bitcoin and Ether (ETH) is incredibly small, as shown in the table below:

In addition, cryptocurrency wallets are easily embedded into any digital device, be it a mobile phone, laptop, or any other IoT device. While fees can vary greatly from network to network and from case to case, it is not a problem for many protocols and can be as low as a fraction of a cent.

Last but not least, user privacy. Due to the asymmetric encryption of the blockchain, the payer only discloses his public address when paying, which practically does not provide any information for those who want to hack their wallet. Unfortunately, the same does not apply to a credit card transaction that requires the card payer to provide the full credit card number in the hope that the payment platform will be properly secured.

Related Topics: Privacy Ruined by the Crypto Industry

Real-life use cases for micropayments
Now that the technology aspect has been revealed, only one question remains: can I get something for a million dollar share? Well, I’m not sure about ppm, but there are many uses for micropayments. Here are some:

Alternative to the subscription model: There is no point in repeating the economic logic of the subscription model for online content consumption and success in recent years, be it video content, music, newspapers, etc., although this model has several advantages. , it is far from perfect and still has some caveats. For example, what if someone wants to buy only one item instead of subscribing? Let’s say Alice subscribes to two online magazines when she finds an interesting article in a third magazine. She won’t go for a third subscription, even if she’s willing to pay just for this article.

Source: CoinTelegraph